Aug. 20 (Bloomberg) -- Telecom Corp., New Zealand’s largest
telephone company, will be able to hold a shareholder vote on a
possible demerger by the middle of next year if it’s selected as
a partner in a national broadband plan.

“With a fair wind and willing parties, the heads of
agreement, shareholder vote and legislative change that supports
it could be done by that time,” Chief Executive Officer Paul
Reynolds said on a conference call today to discuss the
company’s earnings.

The government is planning a NZ$1.5 billion ($1.1 billion)
nationwide fiber-optic network and is weighing bids from
potential partners. Vodafone Group Plc and New Zealand’s
electricity distributor, Vector Ltd., are among companies in 15
groups that have submitted proposals to take part.

“There’s a fantastic prize to be won here,” he said. “In
order to grasp this prize you need to bring together two really
energetic, willing parties.”

The shares fell for the first time in a week, declining 3.3
percent to close at NZ$2.03 in Wellington trading.

The government has ruled that companies that want to join
the ultrafast broadband plan shouldn’t also offer retail
services. Telecom this month said it would distribute stock in
its network company Chorus to existing shareholders, creating a
business that meets the requirement. A decision on the
government’s partner is expected in October.

Proposal Submitted

As much as NZ$500 million a year of capital now invested in
existing copper-wire lines may be diverted to the new network,
Reynolds said. He declined to give details on potential earnings
from the new networks.

Standard & Poor’s earlier this month placed Telecom’s A
credit rating on watch for a possible downgrade after the
demerger plans were announced.

Should Telecom lose its single-A status it would trigger a
$194 million collateral payment to cover positions in
derivatives markets, Chief Financial Officer Russ Houlden said
today on the call.